November 7, 2023

Dumb as a doorknob…

On September 26, I recommended a major short in the Cattle Complex.

Sept 26, 2023

I THINK THIS IS A DEBACLE THAT IS JUST GETTING STARTED…As I have documented in previous newsletters, 15-25% declines are the norm here…And I think that is exactly what we are going to see during the next 2-3 months.

I CONTINUE TO STRONGLY RECOMMEND SHORTING BOTH OF THESE CONTRACTS…RIGHT HERE. RIGHT NOW…When they crack, they DO have a tendency to go straight, straight down…

Several days later, I stupidly exited that short recommendation with small profits using the following “logic.”

Sept 28, 2023

I have made the decision to NOT be short the Cattle Complex here. In a nutshell, with the Cash Live Cattle market currently at about 83 cents…with the December future at 190, February, 2015 at 194, and April, 2015 at 197 (14 cents over the cash market), GETTING SHORT THOSE CONTRACTS JUST LOOKS TOO EASY…and if there’s one thing I’ve learned about futures, it’s that if it looks obvious, or almost risk free, you’d better not believe it…

And this was easily one of the worst decisions I have ever made in this business…

The recommendations were:

 And this is what has happened…These were both BIG MONEY recommendations.

As I have written before, nothing that I use as an “indicator” in my decision making represents the Holy Grail of trading…And, obviously, getting out of my short recommendation in front of what I had regarded as an INEVITABLE COLLAPSE, because it “looked too easy,” was certainly not a smart move…but this now does serve as a reminder not to OVERTHINK my approach to the three other markets below that I also believe are on the verge of INEVITABLE LARGE PERCENTAGE MOVES.

As for Cattle, I believe they will be going down for many months to come, but right here, getting short has become more complicated…and waiting for some sort of further consolidation, or uptick, is the only way I can even begin to considering reentering that trade. So…I remain on the sidelines there.
 

 The Greatest Buy in the markets today…?

At the extreme of extremes…

BUY THE JAPANESE YEN

Whenever I get involved with the currencies, the first thing I always do is quote Alan Greenspan, who, as Federal Reserve Chairman, was unquestionably at the tip top of the world economic information chain, and therefore certainly  had more beefy computers, and more economic data, and more expertise around him than ANYONE else on the planet…And the following is what he opined more than a few times: “I would like to raise a technical issue and a flag of caution regarding …any forecast of exchange rates. There may be more forecasting of exchange rates (global currency values), with less success, than almost any other economic variable.” Or, as he put it more bluntly on another occasion: “Statistics have shown that forecasting exchange rates (global currencies) has a success rate no better than forecasting the outcome of a coin toss.”

The point? Even though the brokerage house/internet talking heads are forever predicting what this or that currency is going to do, according to Greenspan, NOBODY (that he knew anyway) understands what moves the currencies, and your best bet then, is to ignore all “expert logic” out there and just go with what your gut, or common sense, tells you.  And while I could give you pages of that “logic” based on the conventional metrics that supposedly affect the Japanese Yen, all I am going to say here is that it has gone so deep in the hole as to be ridiculous, and I think the odds of a $12,000-$15,000 rally (per futures contract) from here are quite high…SIMPLY BECAUSE SHARP REVERSAL S FROM EXTREMES ARE THE WAY THE MARKETS TEND TO WORK…and beyond that, SIMPLY BECAUSE JAPAN IS NOT SOME SORT OF 3^rd WORLD COUNTRY THAT DOESN’T “MATTER” ON THE WORLD STAGE.

To me, it’s all just math here…that putting capital on the table here, with 6-8 months of time…and looking for a 10-12 point rally just makes great risk-reward sense…And that furthermore, if no turn has come within the next 3-4 months, from whatever level this market is at, it will make sense to do it again…

And Cocoa is the next version of Cattle…

Super high…and ready to collapse

BE SHORT COCOA

I am not going to give you some longwinded bit about what moves this market…and just say I’ve seen this script before…where this relatively small market which is NEVER in the headlines, starts showing up in the financial media with the classic “Shortage” label AFTER prices have gone to the moon.

So…without overthinking it, up here at $3900 a ton…in this market that DOES make big sharp reversals (very much like Cattle)…I simply think this makes for a fantastic bet.

DO note how it has MOVED for the past 40 years…

I would even offer that Cocoa, here, looks very much the Feeder Cattle 6 weeks ago…After a long run, and one last push into new highs…then just truly, truly collapsing…just a CLASSIC FUTURES REVERSAL.

 
And yes, I STILL SEE SHORT SOYBEANS AS A GIGANTIC TRADE…that all of the action for the past few years represents a massive top…and for that matter, that the size of this formation may be an indication that when this does break down…WITH SO MANY PEOPLE BULLISH FOR SO LONG…it’s going to be “nastier” than anything Soybeans have seen in years. And I’m not just being stubborn…I firmly believe that what you see below IS a top, and my experience plus 50 years of Soybean Crash examples suggests that ANY down day or ANY down week can be the beginning of straight, straight down…And as it always is, pretty much everybody…analysts, farmers and speculators…will be totally, totally surprised…and again, not at all unlike what we have seen in Cattle.

 A few quick updates…

Enough (too much) for one day. Thanks if you made it through all this.

DO something. There are some great trades here I think…

Thanks,

Bill

770-425-7241

866-578-1001

All option prices in this newsletter include all fees and commissions. All charts, unless otherwise noted, are by Aspen Graphics and CRB.

The author of this piece currently trades for his own account and has a financial interest in the following derivative products mentioned within: all of them